Tag Archives: The Russian Economy

Oil prices have dropped and the Sanction by America and Europe connected to the Ukraina , have bitten into the Russian economy….

Will this bother Russian leader Putin?

Russians are experiencing the first sustained decline in living standards in the 15 years since President Vladimir V. Putin came to power. The ruble has fallen by half against the dollar, driven by the plunging price of oil, the lifeblood of Russia’s economy. As a result, prices of imported goods have shot up, making tea, instant coffee, children’s clothes and back-to-school backpacks suddenly, jarringly expensive.

Making matters worse are the retaliatory bans that Russia placed on food imports after the United States and the European Union imposed sanctions for its actions in Ukraine, a policy that took a turn for the weird this month when the government destroyed thousands of tons of what it said were illegally imported foodstuffs including cheese and peaches.

The reduced supply means that what remains costs more, even if it is locally produced. Russians are paying a third more for sunflower oil, a fifth more for yogurt and three-quarters more for carrots compared with a year ago, according to government statistics. (The Western sanctions, for their part, have driven up the cost of borrowing for Russian companies, but they have not had a direct role in the inflation that is raiding Russian pocketbooks.)

Inflation has reduced the purchasing power of Russian wages by more than 8 percent in the second quarter, compared with the same period last year, according to figures published by Russia’s Central Bank at the end of July. And in a sign that the worst is far from over, the economy contracted by a steep 4.6 percent in the second quarter, compared with last year, and officially entered its first recession since 2009.

“It’s horrible,” said Elena Shcherbakova, a 47-year-old shoe saleswoman whose income, based in part on commissions, has fallen nearly a third since last year. She says she now shops at discount supermarkets, buys the cheapest kind of sausage and carefully counts containers of yogurt instead of throwing them into her cart by the handful the way she used to.

It is not clear what, if anything, this means for Mr. Putin. The trouble pales in comparison with the turbulent 1990s, when people’s wages went down by nearly half. Russians have an immense capacity for stoicism, and ubiquitous home gardens make budgets more flexible. Mr. Putin’s popularity ratings have remained high since last year’s annexation of Crimea, which was wildly popular among Russians…..

Politico is out with a piece that spotlights the background worries of Russian movers and shakers and lays bare what seems to be a Russian effort buy Europe ….

The piece explains how the Russian’s have become huge trading and business partners with Europe, and for this reason Russian President really was in the drivers seat in excerpting his will in the Ukraine…

The Europeans stood by while Putin took the Crimea from the Ukraine in broad daylight and was probably looking to take back more….

But President Obama did something we all thought was meanness….

Use the Russian economy as a weapon….

He issued sanctions….Europe balked …Worried about the strong economic trade they have with Russia….It seemed to be a no go…

But Russia has NOT sent anymore troops(Ah, maybe Not?) into the Ukraine…

They’ve armed the pro-Russian separatist ……

That was kinda alright….

Until they shot down a few planes, including a commercial jetliner….

The rebels blew up more than a plane. They blew up Russia’s winning position in Brussels against sanctions. Europeans like to think they play games with others, but the truth is that for years Russia has been pulling strings inside the European Union. The boys in Brussels like to boast about the EU. But they are ashamed to admit how far the Kremlin had gamed them: playing them off each other with energy, armaments and oligarchs.

None of the heavy hitters in Europe were willing to give these up big, juicy bribes for Ukraine. This is why serious sanctions have taken so long. Because for all the fighting talk from the Eurocrats, Russian money has run rings around its interests, its cash aiming to cripple any common foreign policy. Russia is Europe’s third-biggest trade partner. Moscow’s investments in the continent are enormous: Russia does over 40 percent of its trade with the European Union, supplying the bloc with roughly a quarter of its gas, while receiving more than $310 billion in loans from its banks.

Kremlin tactics were simple: use this money to divide and rule. That’s why Russian diplomats no longer sound like KGB agents. They never talk ideology; they always talk about money. Putin’s best diplomats now sound like clever businessmen: Does Germany want its own personalized pipeline? Excellent. Now, we only want Berlin to be a little more understanding on human rights… Would France, or Italy, like special military and energy deals? Fabulous. This could be arranged, but please, no more lectures on how to behave. Would Bulgaria, Hungary, Romania or perhaps Austria like our latest pipeline routed through sovereign territory? Wonderful. But remember, we need you to stand up for us in Brussels. Would London like to be the destination of choice for our lovely oligarchs? Superb. Now, let’s not look too closely at offshore finance.

Russian diplomats have been creating covert allies, especially out of the weaker Eurozone states such as Italy, Portugal and Spain. These recession-battered governments wanted nothing more than millions more Russian tourists or cheaper energy discounts. In exchange, they have been more than happy to make the case for Moscow inside the EU. They were not alone. Russian diplomats went shopping around southeastern Europe with the proposed South Stream pipeline – using the proposed route to buy friends and favors in Brussels out of Austria, Greece, Hungary, Italy and Slovenia. These crafty games have stymied hopes of the bloc ever forming an energy union to conduct gas deals with Russia. Instead states still deal individually.

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This is why nothing big happened on sanctions before the downing of MH17. Kremlin sweeteners had divided the big three players…

President Obama’s economic ‘big stick’ moves have had an immediate effect on the Russian economic system….

Russian policymakers warned Thursday of grave international financial consequences from a new, stronger round of U.S. sanctions, a sign that the measures may be inflicting pain not just on key individuals but on a broader swath of Russia’s economy.

Prime Minister Dmitry Medvedev on Thursday called the sanctions “evil” and warned of plans to bolster spending on defense and security in response. Russia’s stock market dropped sharply Thursday after the U.S. decision a day earlier to target major Russian banks, energy companies and defense firms with tough restrictions on their finances.

“We may go back to the 1980s in our relations with the states that are declaring these sanctions,” Medvedev told a meeting of cabinet ministers that was broadcast on Russian state television. “This is sad,” he said.

“We will also have to give more attention to our defense and security expenditures” in the aftermath of the sanctions, he said.

…

The sanctions are “a primitive attempt to avenge events in Ukraine that are not developing according to Washington’s script,” the Foreign Ministry said in a statement Thursday. “A serious loser will be the business community of the U.S.A., which will have to pay the White House’s bill.”

“Such behavior of the Obama administration also inevitably affects the possibilities of our cooperation in many other areas,” the Foreign Ministry said. “Blackmail will not be tolerated. We reserve the right to retaliate.”

Previous rounds of sanctions had targeted individuals close to the Kremlin in an attempt to influence the escalating separatist conflict in Ukraine, which U.S. officials have said Russia is fueling with weaponry and support. Until now, the impact of sanctions on ordinary Russian citizens had been relatively diffuse. But the new restrictions on long-term borrowing by two major banks and two of Russia’s largest energy companies could fuel a broader slowdown in Russia’s economy.

There are reports that Russia has moved troops back to the Ukraine border…..

And continues to support anti-Ukraine militants…..

So President Obama moves ahead with more sanctions….

These new sanctions are aimed Russian institutions and are joined by new sanctions also from the European Union…..

The Obama administration announced new, tougher new sanctions against Russia on Wednesday, targeting major banks and energy companies, a significant swath of the Russian defense industry, and individuals it said were responsible for the continuing support of separatists battling government forces in eastern Ukraine.

“We have repeatedly made clear that Russia must halt the flow of fighters and weapons across the border,” President Obama said. “We have to see concrete actions and not just words.”

While earlier sanctions, primarily against individuals, have been largely brushed off as an inconvenience by their Russian targets, the new round appeared designed to cause significant blows to the Russian economy and fundamentally alter its global financial relationships.

Obama, speaking Wednesday in the White House briefing room, also discussed administration actions in the Middle East and Afghanistan. Noting the Sunday deadline for completing negotiations on Iran’s nuclear program, he described “real progress” and “a credible way forward” but indicated that additional time might be necessary to reach a deal.

He also indirectly addressed criticism that he has been inattentive and hesitant in addressing foreign policy problems. “None of these challenges lend themselves to quick or easy solutions, but all of them require American leadership,” Obama said, adding that the United States should “stay patient and determined.”

The new U.S. sanctions against Russia came as European Union leaders unveiled their own list of more modest measures that cut European investment in Russia and set the stage for possible further action in the coming weeks….

While the world focuses on Russia and the Ukraine squaring off in the media….A more serious discussion is going on…..

Russia has economic problems….

It economy is beginning to recede , while it trades with Europe (which recovering from its recession) they have been sitting on their hands with the American’s trying to get sanctions, and several in the EU having second thoughts….

Russia just signed a big oil deal with China…But that won’t get them money for a few years….

The old Soviet Satellite countries are broke also….

Russian President Putin may have made himself good domestic poll numbers from the flexing on the East Ukraine….But even he has to be worried about the financial stability of his country….

President Obama has made a point and gotten attention through the use of ‘sort power’ on the economic front….

A panel at an annual economic forum here was deeply divided over the direction of the Russian economy. The isolationists in the group favored relying on state banks for its financing needs. Others called for Russia to deepen its ties with China, while a different contingent said global trade and commerce remain critical.

A question projected on a wall loomed large in the debate: “What is to be done?”

On the verge of recession, Russia stands at a critical crossroads.

President Vladimir V. Putin just struck a major gas deal with China, but the first profits will not flow for years. European and American financing is drying up while the crisis in Ukraine unfolds, and Russia’s own businesses and wealthy individuals are sending money abroad. With oil prices flat and the flight of capital from Russia, the International Monetary Fund projects that Russia’s economy will grow a meager 0.2 percent this year.

Most years, Russian officials use the St. Petersburg International Economic Forum, held in the country’s second largest city, to woo foreign investment, with the city’s eerily beautiful period of white nights, or around the clock sunshine, acting as a selling point for delegates. The event usually attracts the global business elite from a variety of industries: energy, finance, manufacturing, media and aerospace.

This year is different. The Obama administration dissuaded many chief executives of American companies like PepsiCo, Alcoa and ConocoPhillips from attending. Even many German chief executives stayed home, in spite of Germany’s extensive trade ties to Russia. Olaf Koch, director of the hypermarket chain Metro, was the only major head of a German company to attend, saying he felt responsible for the well-being of Metro’s 22,000 employees in Russia.

Instead, the meeting was largely dominated by officials, policy wonks and executives from Russia, as well as Chinese investors.

Organizers put a brave light on the snubs. About 6,500 people attended, including 609 foreign and Russian chief executives, organizers said. Robert Dudley, the American head of British energy giant BP, planned to be there.

The focus at the event has shifted, too. In the past, Russia has been trumpeted as a resource-rich country with strong potential. Discussion turned on the subtleties of stimulus policies, or whether emerging markets should have more of a voice in global economic decision-making. This year, the debate centered on whether Russia even needs Western finance, hinting at the return of a heavily state-dominated economic system….

The Ukraine has interned signed an agreement with Europe and the West that Russia President Vladimir Putin had not wanted in the first place…..

And Putin , who announced his own list of sanctions against American’s declared a cease fire in the daily back and forth with President Obama and the European Union, which upped their listed sanctions….

While I and others scoffed at the travel restrictions that the White House announced….It seems that the economic ones that Obama has put into action ARE having an effect on the Russian’s….

American Credit Card companies VISA and Master-charge have frozen Russian cardholders accounts, Russian investment paper has been down graded, which will cost those transactions more money and American and European stocks of companies dependent on Russian business have actually NOT been hurt…

Germany has announced that they could import American shale INSTEAD of Russian crude…..

Which will jack up American interest in shale imports….

American has one of the largest shale deposits….

President Vladimir V. Putin of Russia on Friday formally completed the annexation of Crimea, signing into law bills passed by Parliament reclaiming the contested province from Ukraine. Hours earlier, the acting prime minister of Ukraine signed a political association agreement with the European Union. The pact has been bitterly opposed by Moscow, and its rejection in November by the Ukrainian president prompted the uprising that led to his overthrow in February.

As he cemented Russian control of Crimea, Mr. Putin declared a temporary cease-fire in a tit-for-tat battle of economic and political sanctions between Moscow and the West.

The European Union and the United States have frozen assets and limited the travel of a number of close associates of Mr. Putin’s for their part in Crimea’s annexation.

Mr. Putin responded to the moves by barring nine American officials and legislators from Moscow. But on Friday he said he did not see the immediate need for further reprisals, while leaving open the door for more later on.

With evident sarcasm, he also said in televised remarks that he would open an account at a Russian bank targeted by the American measures, even as the first effects on the country’s economy became clear.

Russia’s stock market opened sharply lower on Friday as a second rating agency, Fitch, followed Standard & Poor’s in warning that it would downgrade the country’s credit rating in the wake of the punitive American response to Russia’s move to annex Crimea.

Visa and MasterCard ceased operations with Bank Rossiya, the only corporation singled out on Thursday by the new sanctions because it served as a “personal bank for senior officials of the Russian Federation.”